A Segregated Portfolio is a legally distinct investment vehicle within an SPC, with its own assets, liabilities, investors, and investment strategy, completely protected by statute from other portfolios.
What Is a Segregated Portfolio (SP)?
A Segregated Portfolio (SP), also referred to as a "cell" or "sub-fund," is an individually managed investment entity existing within a master Segregated Portfolio Company. Each SP maintains separate asset pools, distinct investor lists, independent investment strategies, and its own financial records and reporting, all while operating as part of a single parent legal entity. The SP is the operational unit where capital is deployed, returns are generated, and investors receive allocation-specific communications and performance data.
How Does a Segregated Portfolio Work?
Each segregated portfolio functions as a self-contained investment operation. When investors subscribe to a specific SP, their capital is attributed exclusively to that portfolio and cannot be commingled or accessed for obligations related to other portfolios or the SPC's general operations. The portfolio maintains its own NAV calculation, investor accounting records, and performance tracking. Fund managers can establish different fee structures, investment mandates, risk parameters, and redemption policies for each portfolio based on investor needs. All portfolios share the SPC's governance infrastructure, compliance framework, and regulatory registration, but each maintains complete financial independence for accounting and reporting purposes.
Why Are Segregated Portfolios Important for Investors and Managers?
For managers, SPs provide unmatched operational flexibility, they can customize investment terms for specific allocators, test new strategies, or accommodate institutional mandates without establishing new corporate entities. For allocators, SPs offer statutory legal protection: if one portfolio's investment strategy underperforms or faces litigation, other portfolios' assets remain untouched by law. This structural separation provides confidence that capital is genuinely protected from cross-contamination risk.
Example: Segregated Portfolio in Practice
A hedge fund platform operates an SPC with four segregated portfolios: Global MacroSP managing $50 million with a 10% allocation allocation target, EquitySP managing $120 million focused on long/short equity, SystematicSP managing $80 million employing quantitative strategies, and a bespoke InstitutionalSP with $30 million for pension fund mandates. Each portfolio has distinct investors, different fee structures (Global Macro: 2+20; Equity: 1.5+15; Systematic: 1+15; Institutional: 1+10), and independent NAV calculations published monthly. Despite operating under one SPC, each portfolio's performance, risk profile, and investor base remain completely separate.
When Should You Consider Segregated Portfolios?
Segregated portfolios make sense for:
Managers offering multiple investment strategies requiring distinct governance or fee structures
Creating specialized mandates for institutional investors with unique requirements
Testing new strategies alongside established portfolios without fragmentation
Expanding into asset classes or geographies requiring portfolio-level customization
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